ECON 101 Study Guide - Midterm Guide: Average Variable Cost, Marginal Revenue, Demand Curve

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ECON 101 Full Course Notes

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Unless a question explicitly says otherwise, assume that all market demand curves slope downward and all supply curves slope upward, there are no externalities, and firms are unable to price discriminate. Suppose that the benefit of owning the dog is worth to dick and that jane bears a cost of from the barking. Version 1: the information in the table below depicts the total demand for premium channel digital cable tv subscriptions in a small urban market. Assume that there are two digital cable tv companies operating in this market. If both of them advertise, each will earn a profit of ,000. If neither of them advertise, each will earn a profit of ,000. If one advertises and the other doesn"t, then the one who advertises will earn a profit of ,000 and the other will earn ,000. Since they are identical, each ends up producing half of the non-cooperative market outcome.

Related Questions

Question 13 (1 point)

A firm that has not shut down in the short run will not shut down in response to a decrease in the marginal costs.

Question 13 options:

	1) True
	2) False

Question 14 (1 point)

Saved

A firm earns a positive economic profit when the market price exceeds its marginal cost.

Question 14 options:

	1) True
	2) False

Question 15 (1 point)

For prices greater than the minimum value of average variable cost, the firm's short-run supply curve coincides with its short-run marginal cost curve.

Question 15 options:

	1) True
	2) False

Question 16 (1 point)

Saved

The number of firms in an industry is fixed in the short run.

Question 16 options:

	1) True
	2) False

Question 17 (1 point)

When a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs.

Question 17 options:

	1) True
	2) False

Question 18 (1 point)

Saved

If the market price is currently above the shut-down price, the firm will be making positive profits.

Question 18 options:

	1) True
	2) False

Question 19 (1 point)

A competitive firm's supply curve is identical to its marginal cost curve.

Question 19 options:

	1) True
	2) False

Question 20 (1 point)

Saved

There is no reason for a competitive firm to stay in business if it is making zero profits.

Question 20 options:

	1) True
	2) False

tanfish913

Consider a market with many firms that have different cost structures.

Unless shutdown or exit is optimal, every firm expands production until ___________.

marginal product is maximized.

B. marginal revenue, marginal cost, and price are all equal

(MR = MC = P)

C. marginal revenue is equal to the minimum of the short-run average total cost.

D. marginal cost is minimized.

To construct the supply curve in a market with many firms with different cost structures, the ___________.

individual supply curves for each firm are added together.

individual average variable cost curves are added together.

minimums of theâ firms' marginal cost curves are linked together.

minimums of theâ firms' long-run average total cost curves are linked together.

The equilibrium price is the ___________.

âlong-run average total cost of the last entrant into the market.

the average marginal cost of the firms.

the long-run average total cost of the first entrant into the market.

minimum of the average variable cost of the smallest firm in the market.

In terms of economic profits, early market entrants earn

(negative

zero

positive)

economic profits and the last entrant earns

(negative

zero

positive)

economic profits.

A perfectly competitive firm will choose to shut down when the (price (marginal revenue)/ average total cost) intersects the marginal cost curve below the ( total cost curve average variable cost curve ).

Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the average variable cost curve below marginal cost. B. the portion of the average variable cost curve above marginal cost. C. the portion of the marginal cost curve above the average total cost. D. the portion of the marginal cost curve above average variable cost.

In the long run, the supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the marginal cost curve above the average total cost. B. the portion of the marginal cost curve above average variable cost. C. the portion of the average variable cost curve below marginal cost. D. the portion of the average variable cost curve above marginal cost.

mauvemacaw466

Question 1

The four types of market structures we study in economics are perfect competition, monopolies, oligopolies, and corporations.

True

False

Question 2

Marginal costs will start to fall before average costs start to fall.

True

False

Question 3

A perfectly competitive industry is characterized by a few producers, all producers produce a homogeneous product, and there is free mobility of resources.

True

False

Question 4

One of the objectives of the monopolist is to squeeze out smaller competitors from the market.

True

False

Question 5

Unlike the perfect competitor, who is a price taker, the monopolist is facedwith a demand curve such that he/she can charge whatever price he/shewishes.

True

False

Question 6

A monopolist is different from a perfect competitor by the monopolist'sprice being equal to average revenue.

True

False

Question 7

Average fixed costs diminish continuously as output increases.

True

False

Question 8

The monopolist produces a product for which there are no close substitutegoods.

True

False

Question 9

Economies of scale is when the cost of producing a unit increases as itsoutput rate increases.

True

False

Question 10

The long-run average cost curve will be derived by adding up all the shortrun average total cost curves.

True

False

ECON 101 Study Guide - Midterm Guide: Average Variable Cost, Marginal Revenue, Demand Curve

ECON 101 Full Course Notes

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